Transcripts For CNBC Squawk Alley 20160428

This is the best daily performance since january 28th when it was up 15 . I will tell you what, we asked yesterday whether or not it is the outlier and it is. Truly is, and these results are staggering for a company this size without advertising is growing extrooaordinary within e United States and how well they are soaking up money, and taking advertising from digital, and print and other companies, and am amazing importance. Anything else in the share class ta makes you scratch your head . No, Mark Zuckerberg has had control of the company. And you read the prospectus, and he said, i have a long term view, and if you dont like it, sell it. Great quarter to announce it. People are more forgiving. Exactly. I will stay in control and the investors seem to like that idea. It is really staggering, but the rate of the growth and the moat they have around the assets and the amount of data they have and not just about the intent expre expressed through search, but where you are, what you are doing, and the fact that 66 monthly active users are logging in daily, and it shows a level of commitment that really goes against this anecdotal popular narrative that the kids don like facebook anymore and going to something else, but everybody likes the facebook around the world and engagement is increasing and not decreasing. Again, it is staggering, because we talk about how Much Television we watch, four to five hours a day, and still, it is an extraordinary number, and this number that we spend on one app or property is creeping up or getting into the hour range per day. It is phenomenal. And what about the comps for next year . We are trying to poke any hole we can in this quarter. Well, if you poke the holes, you are going to say that you cannot execute any better than this, and the revenue is not likely to the accelerate from here, and decelerate, and look at the operating margin. Look at how profitable this company is. Can the operating margin go higher . It is 55 , and there are not companies that do this other than the windows monopoly and google when they were not spending on the other things, and so probably not a lot of leverage left, but at the same time, instagram is not monetized yet, and they have the other assets, and video is catching fire in an incredible way, and we have all of the Television Money that is going to be moving, and they are in a great place to capture it. So if you want to poke holes, that it is, but it is not going to be better than this, but it also does not look like it is going to be claptsing any time soon. And obviously, the video is built as the big promise near term, but the likes of the Walt Mossberg on the show saying that the users pay not want to go into the video as easily as they want to post the photos or the comic, so the video, do you feel it is oversoelis. Well, walt can speak to his personal experience, but using facebook with the use of video is brilliant. They have developed a wonderful product for mobile video in particular, and it is more convenient than it used to be to channel surf, and back in the day when we channel surfed before the dvrs and my news feed is alive with video, and before with the pictures, it is static and dull, and so that is only going to be better. And there is so much great professional and great content, and i believe video is a colossal opportunity. And you believe that we will like what we see when we channel surf on the facebook and when my friends moms are going to post their own lye individuvideo, yo watch it . Well, if it is your friends mom, you may be interested, but the idea of, hey, let es just live and point the camera at something, no, no one is going the watch that, but facebook is very good on the al go rhytealgd everyp developer will will have some stories Getting Started and so lots of potential. And the potential for the facebook growth is that if they decide to open up a little bit with the data and create a platform, and more of the platform around the content with facebook, and in other words, if you let other Media Properties use the tools they can use on facebook, but outside of facebook in return for a share of the ad dollars or Something Like that, most of the Media Properties have little idea who is watching the video, and what the value of that person is. If facebook takes more control of that and asks for a share of the advertising dollar in are turn, they can make many billions more. So much of that is happening in the news feed. Yes, the instant articles within the Walled Garden and they can create a platform to give some of the data int intelligence outside of the Walled Garden and monetize it. Then they are in doubleclick territory, and google has to watch out. And 3 million active advertisers from up 2. 5, and just amazing. Facebook with a good day, but rough week for tech as a whole. The whole sector is down, and in the past five days, the worst performing sector of the month, and the worst yeartodate, and it is the only fang stock not in correction territory. People wonder, there is apple and the other a, amazon, if you take a flyer going in ing into. And jim cramer was out there say saying that fang had a great run, and nothing lasts forever, and when the stock breaks down, you have huge multiple compression, and that is what is happening with those stocks, and facebook obviously went another way, and amazon could report amazing quarter, and others getting slammed, but you dont know. Even if you have a long term view, and trying to value the stocks with a long term, the margin of error, and the margin of reasonableness is sometimes a 50 swing ooeither way, so you cant make a valuation. Three key head winds for amazon, tvs, smartphones, pcs. Right, you are looking at the electronics being an important category for them, and we know from the last quarter sh, they talking about the premium smartphones as being a drag for them, and we know that it is continued as we are seeing the results out of qualcomm, and apple and intel that pcs are not blow i blowing the doors out. And where are they buying it . Amazon. It is not as if they are going to be hugely outperforming in those categories as overall retailers they are at this point. And what started the investors hyperventilating about amazon is the cloud. So ultimately, if they sell a fewer smartphones, everybody is going to be overlooking that if the cloud is huge, and similarly the Retail Business is in trouble, but the cloud. And is it more like the google quarter where the Growth Numbers are huge, but it is not hugely outside of the expectations or more like the facebook where the numbers are big, and people are like, wow, how great this is. And the google as the earnings have raised eyebrows as they have in the past. And we should mention that bay soes, and the business. I have owned amazon for years. Yes, it is trading very well for you. And henry, in terms of the broader market, which earnings are a tap for potential indicators, because for all of the positives no Technical Strategist is sending around showing facebook going this way, and s p going that way, and when apple reports the divergence, it is everybody trying to the figure tout dow and the nasdaq and the s, and p a p, and there Many Companies with that heft. That is a good question. Many of these companies with the distinct franchise that the market is not moving in parallel with them, because what they are doing is to unique, that you cant draw the huge parallels. And we have other companies coming in more representative of the overall economy. I am watching linkedin who is reporting tonight. You and linkedin. And you remember the big fall last quarter. Staggering fall. And are nay going be able to recraft the story in a way . Are they able to get jon fortt off of Facebook Live and back into the linkedin influencing . That is the big question. Only time will tell. And another deal, our Parent Company comcast is buying dreamworks, and we have Julia Boorstin with more on that story. Hi, julia. Well, Nbc Universal is saying that they have a deal to close by the end of the year. A hefty premium sending the dw stocks rising on the news. I just spoke to steve burke about why he is invest iing in e asset, and he said that they will bolster the integration of animation. And plus, there is massive potential for the dwas shrek and kung fu panda to accelerate the growth of the theme parks, and that is sure to be used in the china parks in the works now. And they should not be valued on the cash flow an assets alone, but account for the massive synergys from integrating the two businesses. Because of the importance of combining them, folding dreamworks into Nbc Universal, it pakes sense for cats enberg to switch into the consulting role and go back to dijtation. Some insiders say it is taking a page from the pixel and other brands together. And expanding the family brands across multiple platform, and it shows that steve burke is committed to growing and working on comcast media businesses. Certainly, henry, comcast would like it to be A Disney Pixar are result. Yes, and we will see a lot more of this, and we have seen a fair bit of it, but one thing with the digital distribution, and netflix for example is that you have the ability to have so much content within one network effectively, and that kind of the consolidation now has to happen in television, and film, and this is a good example of it happening. If you are antitrust regulator, you say, no, minions and shrek should not be in the same house. Too much overlap . Too much dominance and that is the problem before when they tried to put the Time Warner Cable deal, and 45 million and obviously, this is content and snacksized, but this is a company that stared down the regulators before, and you have to wonder if the antitrust is a issue . Well, it monopoly issue that is the ish sue when you combine the cable companies, but in case, content is everywhere. We are in a golden age of conte content, so it would be a stretch for the government to make that argument. It feels like a fixer upper, and dreamworks has come up with some great characters, and some really good, but they never seem to fully live out the commercial potential. Example, shrek and you know, it is what seems like a great franchise, but had they, the dreamworks do everything they could with shrek and given how popular it was for a time, and the people were quoting the lines from the film, and never seemed to reach the iconic status that any of the pixar films that did well certainly did. My kids were never into any dreamworks franchise to the extent that they are into the mip yons right now. And so maybe, i think that comcast is feeling its own oates a little bit, and figuring it out, minions. And the way that disney leverages the properties at the parks, and that is something that comcast is working towards, an Consumer Products in which disney and by any metric does better than anybody else. So far the bets have worked out. Everybody with big eyeballs when disney bought the lukes film and what a home run and the same with marvel. It is what they do with it. If star wars had been crazy, it would have been terrible. And after j. Jar jar binks, this is a better deal. And is this a better deal than hasbro . Well, on the way to work, crazy idea, but this is going to make a lot more sense. Well, i love the tweet the things that you say. Good to have you here, henry, to talk some media today. And meanwhile, the markets have firmed up a little bit, but the dow is in negative territory, and well off of the lows in the Early Morning after a surprise decision by the bank of japan overnight to not further its easing program which is a surprise to the market. You can see that nasdaq has made its way into the positive tr toir as has the s p, and nasdaq is currently up. And now, paypal, the revenue has shares up 2. 5 , and shares of amazon also in the greenhead of the Earnings Report after the bell, and right now up 2. 5 . When we return, marriott is going to share in the green after the earnings beat estimates. We will speak to Arne Sorenson. And we will also talk about a new cyber heist, and that could mean for the company, and red hat ceo is going to be joining us live. More squawk alley back in a moment. Whats up . Does nobody use a turn signal anymore . It begins from the the second were born. Er. Because, healthier doesnt happen all by itself. It needs to be earned every day. Using wellness to keep away illness. And believing a single life can be made better by millions of others. As a Health Services and Innovation Company optum powers modern healthcare by connecting every part of it. So while the world keeps searching for healthier were here to make healthier happen. A senior new york fed official spoke with cnbcs Steve Liesman and eamon javers about the Cyber Security fears. Hello, eamon. Yes, a new york fed official told steve and they the fed is taking it very seriously and that the Cyber Security of banks around the world that the fed transacts with is critical to the stability of the Global Financial system. Remember, back in february, the crooks got into Computer Systems in bang ladesh, and authorized transfers of nearly 1 billion out of the accounts at the fed, and in new york, they blocked some of the transfers, but released 81 million to philippines and sri lanka and some of it was sent on to casinos in the philippines, and converted to chips there on the gaming table, and we dont have any idea who stole all of that money. Despite the brazen heist, the fed official told us that the fed has no control of the Cyber Security over to the banks that it does business with, which means potentially an enormous amount of money at risk. There are nearly 3 trillion in assets and rough ly 80 billion is wired into and out of the accounts everyday the official sa said. That is staggering pool of money that represents a rich and tempting target for cyber thieves, but if they do strike, the new york fed said that it does not have to tell anybody about it. The official said that there is no law or regulation that requires the fed to reveal that the heists have occurred. Steve and i asked him if there have been other cyber thefts like the bank of bangladesh heists, but he said not in the central bank context, but the official and the spokesperson declined to respond to several questions about whether account s at private banks at the new york fed have ever been victimized. Back to you. And perhaps that is why they make the banks do the siber attacks simulations every summer just to prepare for the worst case scenario, and eamon, scary, but important story. Eamon javers, important story. It is possible if these heists happened, nobody the world would know about it, because the banks have to report them to the the treasury, but no Public Disclosure is necessary by the banks for the fed. Perhaps that is going to change now. Thank you, eamon javers. And now, after the First Quarter earnings, simon hobbs is going to join us with more on the marriott international. And yes, it is to acquire starboard with over 13 billion, and Arne Sorenson is going to join us from the bethesda hq, and welcome to the program, arne. Good to see you gap. Thank you, simon. One thing that we have done with the results of course is to get a read on the economy, and a lot of people given the gdp data that we had today are focussed on the fact that the revenue, the revenue per available room is coming through on the lower end of what you are expecting and as we saw also with hilton, it is select service in particular that is not growing as fast as many had hoped and i wonder what it is going to tell us more broadly about your business and where we are as an economy. Well, that is exactly it. It is the question of the day today, simon. We got off of the analyst call, and in half a dozen different ways the participants were asking that same question, what do you think of the economy and how are things going . The numbers in the First Quarter were 2. 6 for the u. S. Systemwide sales. We did better in the bigger hotels, why . Because of group. And group is booked earlier than the day before or the week before the visit, but maybe a year ago or even two years ago. I you think that when you look at the First Quarter though, it is important to keep a couple of things in mind. And one is the weak gdp number come out this morning, and remember how negative we were in january as an economy about the strength of the future. And the second thing is that we had easter shift from april into march this year, which is bad for our business in terms of the timing. What we said is that we think that it is a steady state scenario, and we expect to see the gdp grow at the 2 rate which is sort of muddling along in a sense. It is not that exciting, but we think that with it, it should drive 3 to 5 rev par growther the same store sales over the balance of the year. And you know, arne, many in the traveling industry are reeling from the news that Darren Huston who is the ceo of priceline has resigned effectively, because he had a relationship with the board deemed inappropriate with an employee, and obviously a a huge and you have a love hate relationship with the Online Travel agencies and 67 million market capitalization, and what is your take on Darren Hustons depa departure . Well, i have no idea other than seeing the headlines this morning which is about as you have deskribcribed them. I know nothing else about this story. Priceline is a great company. They have particularly with the acquisition of the booking. Com, and one of the greatest acquisitions ever from a financial perspective, and we is have had a long relationship with them. It has positive features to it. They deliver incremental customers to us who are typically leisure customers who stay with us only occasionally, but obviously, wed like to have as many of the customers book with us as directly as possible. That is where the little tension arises in the relationship. We will continue to work with those things that i am sure will continue to have a constructive relationship with the company in the years ahead. But darren in a sense had challenged the model more, and many people think that the Online Travel agencies posed an existential threat to the hotel brands, because as a hotel owner, you say, why am i paying you 12 revenue and then paying priceline to fill the hotel rooms and many of you are advertising directly to consumers to a great extent, but darren put it to a new level, because he put thousands of boots on the ground to try to locate local hotels in italy with the priceline site with pro p propriority sense, and where does that all lead us, do you think . Well, darren was doing some of those things with us, and using the points for those who stayed with us, and use them nor free vacations and whatever they chose to do with the points, but by contrast, the globally the otas are still relatively small. Now, we are trying to do what we can to make sure that all of the customer customers know that there are advantages to booking directly with us, but we are winning that war, and the consequences of that are that this is going to be a relationship that continues to have push pull to it, but we will be fine. And lets talk finally about starward, and obviously, looking to close the deal, and you need the antitrust permission from the europeans and the chinese, and this is since we have spoken about since the bidding ended, but there was a point at which anban pulled the offer, and you paused, and did you know ultimately from the information that you knew that their offer would pull apart, and what intelligence were you getting that you felt that you didnt need to react that you had reacted before . Well sh, actually they never baked the second bid. If they had fully baked the second bid which is a question of whether or not they would post security for the payment that had to be delivered, if they had ever really baked that bid, then we would have had the question of do we respond or not. And sitting here today in many respect, im still surprised that it came out the way it came out. We had no real insight into what was happening there in anban or china, because i had no contact before they withdrew the bidd g bidding, but when they did, it sealed the deal for us, and we were thrilled with it. And i dont nt know if you noti, simon, but another chinese company, hna is going to acquire carlsons Hotel Business which is goi is going to include the radisson brand and smaller deal, and they have participated in the auction process and the top bidder, but obviously, the chinese economic juggernaut is still interested in the industry, and still interested in investing in the United States, and fortunately they didnt get starwood. The clock beat us again, arne. Joining us from the headquarters of merritt, thank you. And thank you, simon, for bringing us that. We are continuing to monitor the shares of dreamworks soaring on the news of comcast going to buy them for 3. 8 billion over half of what disney paid for pixar ten years ago. We will be right back. 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Some of the head winds are come out of the bank of japan and took the wind out of the european sales. Simon is hoar with simon is here with more. And yes, they cut the losses in europe as it comes to tend of the session, and basically as wall street has come off of the lows, europe has risen as well. It is a height of the earning season, and people are focus on that. Here are the main earning movers, and bbva is the second largest in spain, and airbus has a problem with the jet deliveries and they are argue whether i off of the lows, and the top gainer is e electrolux, the Largest Consumer maker in europe, and missed out and the g. E. Sales, but they have good sales in america and the usa coming through with a gain of 8 for the First Quarter and raising as they are unlocking the number of difficulties there, and raising the full year. And electrolux is the big gainer there, and volkswagen gave more information on the emissions scandal. A lot of anger in europe, but they are refusing to buy back affected vehicles in europe. They will only buy back the diesels here in the United States, and finally a figure on, that and they have broken it down to 9 billion is the cost of that for vw, and usa and audi and associated brands obviously. Another thing that is going to be rancoring the trade unions is that in europe, the labor unions are on the supervisory boards is that they are unable to claw back some of the remuneration that the exoof voeldz wagon got back in excess of 8 million, and other executives have had the remuneration reduced and this is not going to happen with the current ceo, because he has left the board as it goes. And to spain, yesterday, we got the fuse that the spanish election is basically on, and now, everybody is beginning the campaigning. This is the outgoing Prime Minister, and arguably never was the full Prime Minister, and what is interesting here is that the data is really quite poor as spain heads into the election, and unemployment is rising to 21 . Again, you will see the consumer deflation. We see deflation now, and inflation down 1. 2 coming through year over year, and guys, that is also deflationary aspects emerging in the states of germany as they are reporting, and overall, people would say that the european economy is better than we might expect, around certainly the bank lending is holding up now. And yes, ford turning europe into the black as well. Thank you very much, simon hobbs. When we come back, the facebook is ral i willing to the new all time highs and how long can the stocks continue the rise . We will talk to scott mchanie after a short break. Any. One totally focused on whats next for your business. A True Partnership where people, technology and ideas push everyone forward. Accelerating innovation. Accelerating transformation. Accelerating next. Hewlett packard enterprise. Hello, everyone. Im sue herera, and this is the cnbc news update. The death count is rising in the deadly Pediatric Hospital attack if syria. A direct air strike killing at least 27 people at a Hospital Associated with doctors without borders, and the casualties include six hospital Staff Members and three children. Investigators are trying to find out who is behind that attack. The United States reporting it has detected two attempted missile launches by north korea since last night. The u. S. Strategic command saying that neither of the missiles posed a threat to north america. Joe biden is meeting iraqs Prime Minister in baghdad today in unannounced trip, to deliver a passioned plea to end that crisis which the u. S. Fears is a distraction from the fight against isis. It is the first trip to iraq since the u. S. Withdrew the forces in 2011. Another chanel boutique robbery. They smashed a car into the front door and then torched it and escaping with merchandise on scooters. That is the second such heist. And now, thank you, sue herera. And facebook is shattering earning expectation s s today, the social network is offering a three for one stock split, and how should the investors expect this to continue . Lets bring in mark mchanie, and john, we have approached this everiway, but when you look at the forward earnings valuation, we are looking at like a value stock pretty soon . Well, yeah, no, it is a great point. Traditionally it trades at 35 times forward and i think that, thats the pathway for the stock. You know, we are close to 5 next year on the earnings, and is so kind of the 35 times that or 30 times ta, and it gets to 150, and so we believe there is more upside here. And a key theme, we think they are going to obtain 5d share. We had them rising from 11 last year to 26 by 2021 driven by the rising users and rising engagement, and rising ed advertisers. Marhe sto is up 14 year to day and the only fang stock that is not in the correction territory, and i bet you wished you could spell bagel with an f somehow, huh . Yes, the bagel call turned into one of those bagels and not bagel that we were anticipating, and you were asking can about facebook, and how sustainable is the are Revenue Growth and enough data points to make you think that it is sustainable. Two of them. 200,000 advertisers on instagram versus 3 million in facebook and so that looks like a gain opportunity. And john talked and it, but facebook is accounting for 3 ad spend globally and compp that suggests they could rise . Yeah, it is google. And they are over 10 or 11 or 12 ad spent globally and it is and if, but a big if, and you could see the Revenue Growth over time, it is sustainable, you could buy the stock even today. And mark, at what point do you talk about the the zero sum game between facebook and google . I am looking at the revenues, and you know, facebook is over 5 billion, and in a quarter, and scaling up to and expected maybe better than 8 billion at the end of the year, and google is more in the 16 billion range, and they are a lot closer together than they used to b and they are playing in each others sand boxes more than they used to. And facebook is playing in googles, and google never figured out social. Yeah, so lets see, two points. One, there is clearly a source of funds for both companies, and they are are coming from other internet vendors, and that is the problem with twitter, and why yahoo has not had any Revenue Growtht for more than a decade, and aol was lost fundamentally five years ago. And then, there were other sources of funds, and what i have talked about with tv advertising is a source for both of the companies, and google with youtube may be better positioned against i. So there is good growth for both of the assets from online and offline resources. So it is not going to crimp each of the growth rates yet. And john, there is the creation of the cclass for facebook which is going to be a onetime dividend paid to the shareholders later this summer, and it is not three at one stocks as we have read before, but i am wondering if you think that the preservation of the voting control from Mark Zuckerberg and while it is looking good now, can you envision a scenario down the line when investors would have been more worried and less pleased it happened . I dont think. So we have seen it with other companies, and you know, he has philanthropic plans for himself and his family, and for his trust. So we are not concern eded abou this at all, and we feel that Mark Zuckerberg is going to be at facebook for a long time and they have a Great Management Team behind him orchestrating the great stock run over the last three years. And john, do you think that the gains in facebook, they are so outsized relative to tech, that we have seen a onetime rotation of the capital into the facebook shares or sustainable throughout the rest of the year . Yeah, no, it is definitely sustainable, and we think that they are going to have great growth in the coming quarters and there is definitely a rotation in. No doubt investors are riding this horse. They had great quarter, and if you are going to look over the last three years, they have had the best earnings in internet and maybe all of tech, and you know, consistently, and incredibly consistent over the last three years really since the big 2q13 quarter, and so now it is 120, and so we think it continues, and more leverage for the company to pull. You know, we think that the stock continues to rise from here. And 330 billion market cap, and it is stunning the rise. Thank you mark and john for joining us today. Thank you. 340 billion, and that is pretty cool. And abbott labs is buying st. Jude medical at a deal of 45 million, and those stocks are moving in Different Directions this morning. Coming up on the halftime report, is facebook the new apple . The shares are ripping after another blowout quarter and is Mark Zuckerbergs company the best in tech . And plus, we will is have mohammad alairian on the set to tell us where the stocks go from here. And we will speak to michelle cabreka brar Michelle Carusocabrera who is going to elle the us about the iran stock exchange. And look at all of those kids around with take your kids to work day. Ba back to you, kayla. Thank you, and lets go the Rick Santelli at the rick san tell hly exchange. This morning when i looked at the inbox, i had seven emails talking about the fed fund futures and percentages and when the tightenings are going to occur and this not kind of in the gray, but fleshed into two places past the decimal points, and 32 , and 19. 5 , and highly detail detailed. I remember back in the 1980s when the fed fund futures contracts first started trading and i can remember in the 1990s when the light bbulbs went on tt this is the type of betting with money behind it that can give you a better probability of with what is going to be happening in the future fed meetings, and lo and behold for years, it worked great, and now, flashing forward and back waward and remember th Addams Family omovie they had in the movie all of the stop sign, and pugsley puts down the stop sign and then you hear a car accident . Well, it is the same with the fed fund futures. And so when we follow the rules of the road and following the fed meetings and the fundamentals of what the fed looked at was consistent over a long period of time, and the fed futures contracts and especially close to the meetingsings were highly accurate, but those das s are gone. I am hearing the screeching right now. No rules of the road and the fed and the Central Banks are doing it on the fly to think that the outcome of these per en is tajs is going to be anywhere as accurate as it used to be, sorry, im not buying it, and word of caution is due if you are following that only. And second thing, japan. The bang of japan didnt add more, and i wont even call it stimulus, because it is stimulus, because it is simulation of stimulus, but it is not doing what stimulus is going to do in a sustainable t pattern, and they didnt do it, and what happened . The same thing maybe, the stock markets went down, and the yen is stronger, and the point is that, this is maybe the first sign that investors are going to get a little bit nervous about the cocktails that are going tointo the marketplace to try t fix what is potentially going the ail japan for decades and last but not least, i want to go quickly, i have talked about the Double Bottom in the boon, and the sovereigns, and does it mean that it is rates down . No, and i will tell you why. Here is the tenyear boon, and the e key levels 10 basis point, and 9 basis points in the bottoms of february and april and the significant tops were topsyturveys and higher highs or lower lows and if this is going to turn into the wedge and you close below 30 or more as the 9s, then you could have the 1. 966 or 1. 92, and it does not mean that Double Bottoms are not going the work but they could turn into the wedges and consolidate, and either way, look at the last levels of 192, and 169 on the 10year note yields. Kayla, back to you. Rick santelli in chicago, thank you. And up next, the leading provider for open Source Solutions of red hat, the ceo will be here to discuss the vulnerability of the cloud. Stay tuned. Second were born. Because, healthier doesnt happen all by itself. It needs to be earned every day. Using wellness to keep away illness. And believing a single life can be made better by millions of others. As a Health Services and Innovation Company optum powers modern healthcare by connecting every part of it. So while the world keeps searching for healthier were here to make healthier happen. Man 1 i came as fast as i man 2 this isnt public yet. Man 1 what isnt . Man 2 weve been attacked. Man 1 the network . Man 2 shhhh. Man 1 when did this happen . Man 2 over the last six months. Man 1 how did we miss it . Man 2 we caught it, just not in time. Man 1 who . How . Man 2 not sure, probably offshore, foreign, pros. Man 1 what did they get . Man 2 what didnt they get. Man 1 i need to call mike. Man 2 dont use your phone. Its not just security, its defense. Bae systems. From amazon purchasers to dreamworks, red hat powers the technology that 90 of the fortune 500 Companies Use to run their business. The company is working to transform the cloud and making several announcements at the open stack summit. James whitehurst is the ceo of red hat, and thank you for being with us. Great to be here. Thanks for having me. And we have to start out with the enterprise spending, and we have seen some mixed signals on that this earning season, but mostly bad, and how does it look from your perspective . Is spending overall decently strong when it comes to cloud . Is it tailing off in more traditional areas . Yeah, i think that what you are seeing is a rotation, and spending is flat and slightly up in the enterprise spending, but it is moving from the traditional on premise workloads to cloud and software as a ser i have. So what you are seeing is the winners and the losers. A lot of the people in the traditional old world are having a tough time to make that transition, and people like amazon are growing quite nicely. When you are looking at your position coming out of the Something Like open stack, there is so many now competing power bases in the cloud that are trying to get customers to move in their direction, and are you sitting in sort of a neutral position in that, and how do you see that playing out as you are having conversations with the cu customers and the potential customers about getting more of their business . Sure. You make a good point there. You have a google camp and amazon camp and a microsoft camp of the people building the large, large cloud infrastructures and i would hate to be in the business of competing against them. That is one of the reason tas you are seeing the Larger Tech Companies having issues. For red hat, we are a little bit of the arms dealer to the cloud providers as well as we sell the software where the enterprise can write an application, and run it on amazon or microsoft du jour or google. Ap and one of the reasons that you are seeing the momentum out of red hat over the last couple of years and the acceleration of the growth is that more and more people are moving to the platform, because they can run it across any of the cloud provi providers. Jim, one of the arms dealers is block chain, and the ability to partner with companies who are trying to build block chain capability, and of course, that is the technology that is p powering biqim, and so how close is that to becoming an Everyday Technology . Le with, within a couple of years of seeing nit limited ways, and probably five years before you will start to see the true transformation happening with it. The technology is extraordinary, and recognize that it is not just for the currency, but it is a way to complete transactions whether it is a mortgage contract or a stock trade or two individuals exchanging money. It is allowing it to happen in a much more efficient way without central parties in the middle. And so, there are challenges around insuring security, and this is one of the reasons that red hat is so involved in it so make sure that the infrastructure can be safe and secure, but it is transformational over the next few years, and so many of what you think is the factory like components of the Financial Institutions and the money clearing and the transfers is going to be completely transformed by bit coin or block chai chain. And jim, North Carolina where the base is in the news quite a bit recently, and in part because of this bathroom bill, what impact if any is that having on your business . On the hiring . The conversations that you are having with the potential recruits about coming to North Carolina . Well, for redt hat, itself, we are a e global company, and out of the over 9,000 employees, we have 1,000 here, and for red hat, we offer homes for employees wherever around the world they want to live and certainly multiple places in the u. S. , so it has not directly affected our business, but it is impacting North Carolina businesses and paypal decided not to locate a facility here, and multiple concerts and conventions that have pulled out. It is a problem. North carolina is a very inclusive open state, and it has been, and unfortunately this bill is an instance that is stepping us backwards and we need to work forward to address that so we can continue to look forward, and being based here sh, North Carolina is a phenomenal place to be based as a great group of talent here for employees, and it has a great cost of living, and it is very business friendly, and unfortunate unfortunately, this is a black eye that we dont need. Indeed. Research triangle there powerful, and you guys are adding to it. Jim whitehurst, ceo of red hat. Thank you. Appreciate it. And amazon shares looking for a nice earnings after the bell. We will tell you what to watch for in a moment, dont go away. The webs leading job boards f with a single click. Then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. announcer over 400,000 businesses have already used ziprecruiter. And now you can use ziprecruiter for free. Go to ziprecruiter. Com offer6 on the heels off facebooks monster First Quarter earnings, amazon is looking for earnings after the bell, and looking for 58 cents on the revenues of 27. 98 billion, and wall street is looking for the growth in the prime and the growth in the Cloud Services business and not only the name that is getting a high, and texan is breaking out above difficult levels and linkedin, highest since the debacle in february. Yes, the investor want to believe that there is a better story in there, and i will tell you that on the amazon, 2. 5 billion is a key are level to watch, and on the one hand, you heard James Whitehurst how theirs is moving to the cloud, and that should benefit the companies that are there and amazon is the biggest, and on the other hand, pcs and smartphones are not selling, and that is a big part of what amazon sells. Linkedin is still down this year. Party pooper. Over to wapner and the headquarters with the half. Welcome in, guys. The facebook phenomenon, and that stock is surging this hour, and it is the new mustown name, and with us, Joe Terranova and jon and pete najarian, and the halftime resident shark. And now, lets kick it off with fa facebook, and sending the shares to a new high, and a number of firms are raising the price target to give a much needed bum bump to technology, and we are asking this question this hour,